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Business Law

Business Law

Part 1

Question one

The direct effect doctrine is a principle in which under certain conditions some provisions in the European Union treaty confer individuals with rights that member countries are obliged to grant (ANTONIADIS, 2007). In the event the rights are denied in any member country, individuals and business can sue the member state in its national courts for reinstatement of the rights. In other words, the direct effect principle implies that an individual can enjoy certain rights given by the European Union law, under certain conditions, in European Union member countries even if those rights contravene the existing national laws (THEIS, 1997). According to THEIS (1997) the doctrine of direct effect avoids the European Union the need to challenge member states either in the European Court of Justice (ECJ) or in any other member country’s courts for any state rules that are contrary to any European Union law right conferred to individuals under the Union law. This is beneficial to European Union since it lacks the political willpower and resources to carry out such expensive and potentially numerous litigations (PÅL WENNERÅS, 2006).

In the land mark case of Van Gend en Loos v. Nederlandse Administratie der Belastingen in 1963 the European Union court of justice set the precedence for direct effect principle by ruling that some provisions of the treaty that established the European Union could confer legal rights enforceable in member countries courts (CHARPY, 2010). In this case Van Gend en Loos was a company that imported urea-formaldehyde from manufacturers in West Germany and sold to customers based in Netherlands. When Netherlands slapped the company with a tariff that according to Van Gend en Loos was in contravention of the European Union law and more specifically Article 12 of the treaty the company paid the tariff and sued for refund. In this case the European Court of Justice (ECJ) held that certain provisions of the European Union treaty could have direct legal effect which could create rights enforceable in member countries courts even if they contravened national rules. Direct effect principle enable rights conferred to individuals as a consequence of provisions of the European Union treaty to be superior to contrary national rules in all member countries (JACOBS, 2004).

The European Court of Justice however ascribed direct effect to provisions of the European Union treaty that met the criteria of being absolute in their terms, were clear and precise (JACOBS, 2004). Other requirements were that the provisions should not have required member states to pass legislation to implement them and had to enhance the rights of individuals. There ECJ found many provisions in the treaty that measured up to these requirements and these included; Article48, 52, 30 and 60 which related to the right of establishment, free movement of workers, free movement of goods, and free provision of services respectively (PÅL WENNERÅS, 2006).

Based on the personal conduct of a person an individual can be denied enjoyment of rights which have direct effect but do not have direct applicability as was the case in Van Duyn v Home Office of 1975. In this case the plaintiff was denied entry into England on grounds that she practiced Scientology; a religious practice banned in England at that time. The European court of justice held that the English authorities acted in order since even though the European Union directive had direct effect it did not have direct applicability due to the personal conduct of the plaintiff (PÅL WENNERÅS, 2006). European treaty provisions have a horizontal direct effect. In few instances the court held that the rights conferred by European Union directives have a horizontal effect which is the right of an individual to sue another private individual to either gain rights or impose obligations to the other party pursuant to the treaty provisions (PAPADOPOULOS, 2011). Such EU provisions as the right to equal pay, competition law and football transfers have been enforceable. There is also the issue of vertical direct effect whereby member countries fail to put in place community legislation that fully achieves EU directive objectives. In this case the national legislation is not fully adaptive to the EU directive an in this case the member country continues to effect the improper legislation. The EU in many cases is unable to address these concerns (PAPADOPOULOS, 2011).

In cases where directives are not directly effective the rule of indirect effect otherwise known as the rule of interpretation is required to take effect. In this case each member country’s courts are supposed to interpret and apply legislation that implements the European Union directives as long as the courts are allowed by the national law to do so. Article 5 of the treaty that established the European Union requires states to come up with mechanisms to ensure that the obligations of the treaty are achieved (MACARTHUR and WILSON, 1996). The case of Francovich& Others v Italy is a classic example of how the indirect effect principle was applied. In this case employees of a certain company that became insolvent sought compensation from the Italian government for failing to protect them as required by a European Union law directive (KLAMERT, 2006). The Italian Court that adjudicated the matter after having established that the directive was not directly effective held that, under certain conditions, individuals and businesses may claim damages against the government for its failure to implement an European Union directive as long as the directive allocates rights that are identifiable and proves that a link does exist between injuries suffered and governments failure to implement the directive (MACARTHUR and WILSON, 1996).

To further ensure that European Union directives are implemented without failure, the EU court of justice in its factortame III judgement of 1996 indicated that member states can be liable in damages if they breach European Union directives which is an extension of the Francovich case which noted that member states may be liable for failure to implement directives of the European Union. For states to be held liable in damages however; the directive that is violated must be intended to confer rights to businesses and individuals; the seriousness of the breach must not be in doubt and causal link between the injured party and the state must be clear to all (HELFER and SLAUGHTER, 1997).

Question 2

Topic – Art 267 references

The European Court of justice (ECJ) has unparalleled jurisdiction on all matters of Union law directives. When points of union law arise in national courts of member states the ECJ has the jurisdiction to determine any matter that may be controversial and give a binding directive/ruling (SCHWARTZ and SCOTT, 2003). A member country may request the ECJ to rule on points of EC law and remit the issue to the court under Art.267 TFEU only. The ECJ then rules on the points and remits the issue to the court that made the reference for final adjudication of a matter (LAZOWSKI, 2011).

The scope of Art 267 (1) is the interpretation of the Treaties under the European Union and issuance of directives that confer rights to individuals and businesses. The other responsibility under the scope in Art 267 is to interpret acts of the institutions, offices, agencies and bodies of the European Union (GARBEN, 2010). When member country courts have points or disputes that require ruling by the ICJ then the courts refer the matter to the ECJ under Art 267 TFEU who make a ruling and pass it to the court that made the request. References are normally made when the point on Union law requires interpretation and acts of a body or agency of the union is not very clear. For example in Van Gend en Loos case Dutch courts referred the matter to ECJ to determine whether the Union law was applicable in the matter of increasing tariff on the chemical compound imported by Van Gend en Loos and which the Dutch government had levied a duty on (ON BOGDANDY, KOTTMANN, ANTPÖHLER, DICKSCHEN, HENTREI and SMRKOLJ, 2012). This was a classic case of how Art 267 TFEU is applied. References are normally on supremacy, direct effect and interpretation. Art 267 (2) deals with national courts and tribunals that may (they have the discretion to) refer cases to the ECJ whereas Art 267 (3) deals with courts and tribunals that have an obligation to (shall) refer cases to ECJ for determination (DOUGAN, 2007). The CILFT formula offer member countries a window to determine cases where there is no conflict with European Union laws. In this case the national courts are free to adjudicate such cases without reference to ECJ. The European Court of Justice has of late moved to ensure supremacy of EU laws over national laws (POLLICINO, 2008).

Question Two

English law clearly distinguishes between an offer and an invitation to treat. According to JAMES (2006) an offer is when one party makes an invitation to another party or parties to enter into a contract subject to his or their acceptance of certain terms and conditions stipulated in the offer documents. An offer must be made with the intention that it must be accepted without qualification. It must not be vague on its terms and conditions. Once acceptance of the offer is made the parties then sign binding contracts. An offer must be distinguished from an invitation to treat (JAMES, 2006).

An invitation to treat occurs when a business entity invites prospective customers to its business premises to woo them to make an offer to purchase its goods and or services. An invitation to treat is therefore a gesture made to another person to make an offer. Examples of invitation to treat include but not limited to display of goods with price tags in supermarkets/shopping malls, advertisements, auctions, tenders or putting up circulars (BARRY, 1992). However, on advertisements if a party promises to any person to give a reward, this offer can be regarded as enforceable because it is made to the whole world and the contract can be regarded as unilateral.

For an offer to be binding it must meet the thresh hold of acceptance. Acceptance signifies the willingness of the parties in a contract to perform the contract (BARRY, 1992). Acceptance therefore is an acknowledgement from the promisor to the promisee. The promisor and the promisee must therefore express their willingness expressly, orally or impliedly. There must be an element of communication for an offer to be binding (KARAS, 2013). In case the parties agree to use post as the mode of communication then the moment the offer document is posted the offer is made. If the parties use e-contracts, the moment the email is sent the offer is made. The offeree is expected to use the same medium the offeror used to communicate his decision (BARRY, 1992).

The other key component of an offer is consideration. This means that something of economic value or a price must constitute the offer terms and may is subject to exchange. A consideration may be defined as a profit, a benefit, a gain, a forbearance, a detriment, a loss, a responsibility, or undertaking arising out of a contract. An offer may constitute an executory consideration i.e. a promise for a promise (SCHWARTZ and SCOTT, 2003). An offer may be consented to or rejected. Consent in this case means meeting of the mind or consensus ad litem, the parties in a contract may accept. The parties in a contract must be aware i.e. the principle of caveat emptor must be upheld. Parties must always be free to exercise their free consent. An offer must meet the threshold of intention in law. The parties to the contract must have the intention to create legal relations. Courts can only enforce contracts that are commercial and/or domestic in nature (SCHWARTZ and SCOTT, 2003). The other requirement is that the offer must be made to a person who has the capacity to enter into a contract. Offers should not be made to minors, married women, trade unions, aliens, corporations and diplomats because they do not possess the capacity to enter into legally binding contracts (BJORKLUND, 2001).

There are many ways in which an offer can be terminated. An offer can be terminated through a revocation. A promise to keep an offer open for a fixed period does not hinder the offeror from revoking it. Revocation is however ineffective until communicated to the offeree. An offer can also be terminated by a refusal or a counter offer. A counter offer must be distinguished from a request to vary terms in the offer (BAYERN, 2013). An offer can also be terminated by lapse of time. If the offer is set to lapse after a certain period it ceases once the time set lapses. An offer can also be terminated by failure of a condition subject to which the offer was made. If the offeree fails to comply with a certain condition then the offer is terminated. An offer can also be terminated by the death of either party. If the offeree dies the offer also lapses. If the offeror dies the offer lapses if the offeree knows about the death at the point of his acceptance of the offer or if the contract requires personal performance of the offeror (BAYERN, 2013).

References

ANTONIADIS, A., (2007). The European Union and WTO law: a nexus of reactive, coactive,

and proactive approaches. World Trade Review, 6(1), pp. 45-87.

BARRY, M., (1992). Law of Contract. Credit Control, 13(4), pp. 14.

BAYERN, S.J., (2013). Offer and Acceptance in Modern Contract Law: A Needless

SociétéArcelorAtlantiqueet Lorraine and others. Common Market Law Review, 45(5),

pp.1519-1540.

SCHWARTZ, A. and SCOTT, R.E., (2003). Contract Theory and the Limits of Contract

Law. The Yale law journal, 113(3), pp. 541-619.

THEIS, E.R., (1997). Emerging issues on compliance and effectiveness within the European

Union. Washington: American Society of International Law.

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